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Journalism of Courage
Dr Manmohan Singh, the 14th Prime Minister of India, passed away on Thursday at the All India Institute of Medical Sciences (AIIMS) in Delhi.
Before leading the country, Dr Singh had a distinguished career in finance and economics, shaping India’s economic landscape. Serving in various key roles, including as the economic adviser in the Commerce Ministry, chief economic advisor in the Finance Ministry, and governor of the Reserve Bank of India, he is best remembered for his pivotal role in liberalizing the Indian economy during his tenure as Finance Minister from 1991 to 1996.
Let us look the significant reforms during his tenure as finance minister:
📌 Budget 1991: The famous 1991-92 Budget unveiled by Manmohan Singh was the major event that turned the course of the country’s fortunes.
📌 Rupee Devaluation: The rupee devaluation was done in two tranches of 9 per cent and 10 per cent in quick succession in a matter of three days.
📌 Freedom to Enterprises: New Industrial Policy Resolution, abolition of most trade licences, providing freedom to enterprises, opening up the country to FDI, thereby deregulating the industrial sector. New industrial policy was presented along with the Budget on July 24, 1991.
📌 Rupee Convertibility: Full convertibility of the rupee on the current account allowed, giving more flexibility to trade.
📌 Monopolies & Restrictive Trade Practices: Monopolies & Restrictive Trade Practices (MRTP) Act was repealed to eliminate the need for prior approval for capacity expansion by companies.
📌 Banking reforms: Banking reforms announced–Setting of interest rates by lenders were deregulated, new private bank licences issued.
📌 Public listing banks: Public listing of banks and moving to a new framework of recognition of accounts and introduction of capital adequacy norms recommended by Narasimham committee.
📌 Mutual funds: Disinvestment of PSU units to mutual funds. Entry of private mutual funds. Market reforms introduced–NSE was created, paperless trading started, depositories allowed.
📌 Inviting foreign institutional investors: Foreign institutional investors allowed to invest in Indian stock markets for the first time.
📌 SEBI given more powers: Market regulator SEBI was given more powers to regulate the capital market.
📌 BY MID-1991, the balance of payments (BoP) crisis turned into a crisis of confidence in the country’s ability to manage the BoP. The loss of confidence undermined the Government’s capability to deal with the crisis by closing off all recourse to external credit. A default on payments for the first time in Indian history became a serious possibility in June 1991, according to RBI History Volume IV.
📌 SIGNS OF THE PAYMENT crisis became evident in the second half of 1990–91when the Gulf war led to a sharp increase in the oil prices. Foreign exchange reserves began to decline from September 1990. The reserves declinedby71.2 per cent between the end of August 1990 and January 16, 1991, from a level of $3.1 billion to $896.0million. NRIs pulled out deposits on a massive scale
📌 IN APRIL 1991, the Government raised $200.0million from the Union Bank of Switzerland (UBS) through a sale (with a repurchase option) of 20 tonnes of gold confiscated from smugglers.
📌 AGAIN, IN JULY 1991, India shipped 47 tonnes of gold to the Bank of England (BoE) to raise another $405.0million. This action helped the country repay its international donors and creditors, though it was not sufficient to completely absolve the country of the crisis.
